Hungary Facts

Employing in Hungary: What You Need to Know

Key Factors to Consider When Employing in Hungary

There are several key areas to be aware of within Hungary's employment framework, especially for companies that plan to initiate a full local office and human resources department. These challenges can be mitigated by use of a locally sourced payroll provider who is familiar with all of the local laws and rules for both local employees as well as foreign nationals.

Contracts

Hungarian labour relationships are governed by Act I of 2012 Labour code. As Employment contracts should be in writing and should include the following information.

Employee’s base wage and job function

Term of the employment contract. In the absence of the term, the employment contract is deemed to be for an indefinite period of time.

Workplace details

A probationary period of not more than 3 months from the date of commencement of the employment relationship

Within 15 days from the commencement of the employment relationship, the employer should inform the employee in writing

Daily working time

Wages above the base wage and other benefits

Frequency of wage payment and day of payment

Job functions

Number of days of paid annual leave

Rules governing notice period

Whether a collective agreement applies to the employer

Specific types of contracts

There are 2 main types of employment contracts.

Fixed term (határozott időre szóló munkaszerződés)

Duration of a fixed term contract cannot exceed 5 years. A fixed term employment relationship maybe extended between the same parties for a 6 month period or another fixed term relationship may be concluded within 6 months from the termination of the previous fixed term contract.

Indefinite (határozatlan időre szóló munkaszerződés)

Includes permanent employees

*In addition there are assignment contracts (vállalkozói szerződés) where an individual works as a sole trader and invoices the company. These types of contracts are cheaper for employers since tax and social contributions are high in Hungary.

These can include:

Full or part time work

Teleworking

Permanent employment relationships

Employee Entitlements

Daily working time for full time employees is 8 hours and the work schedule must meet health and safety regulations effective in Hungary. Based on an agreement between the employer and employee, full time working hours per day can be extended. However, such total hours cannot exceed 12 hours a day. On average the full time hours per week would be 40 and cannot exceed 60 hours.

Rules relating to work schedules:

Work will be allocated for a five day work week (Monday to Friday)

Daily working time will not exceed 12 hours or 24 hours in the case of stand by jobs

Weekly working time of such employees shall not exceed forty eight hours or seventy two hours in the case of stand by jobs

Rest breaks:

If the scheduled daily working time or the duration of overtime work performed

Exceeds six hours, a twenty minute break will be provided

Exceeds nine hour s, an additional twenty five minutes will be provided

Daily rest period shall be as follows:

At least seven hours of uninterrupted rest period

At least eight hours of daily rest shall be provided to employees working on

Split shifts

Continuous shifts

Multiple shifts

Seasonal jobs

Stand by jobs

Weekly rest period shall be as follows:

Two rest days per week

After six days of continuous work, one rest day shall be provided

On call and stand by duty:

Duration may not exceed 24 hours per day. Duration of the stand by duty may not exceed 168 hours which shall be taken as the average in the event that banking of working time is used.

If the employment has been for more than 2 years the rate of sick pay is 60% and if it has been less than 2 years the sick pay is 50%. The employer is required to pay 70% of wages for a maximum of 15 work days in the event of illness. However, the maximum amount of sick pay cannot exceed two times the minimum wage.

Employers are required to justify their dismissals. An employee may be dismissed for reasons in connection with his/her behaviour in relation to the employment relationship, with his/her behavior in connection with the employer’s operations.

Employer may terminate a fixed term employment relationship by notice:

Probation

Probationary period may not exceed 3 months. However, if the probationary period is less than 3 months parties to the employment agreement may extend the probationary period up to 3 months.

The term of the probationary period of a collective agreement cannot extend 6 months. An employment contract can be terminated by either party without giving prior notice during the probationary period.

Citizens who are not insured are required to pay HUF 231 per day for health contribution

Retirement benefits:

This is operational under a compulsory governmental pension fund scheme. The basis is the average monthly salary earned since 1988 multiplied by an inflation adjustment rate. Minimum pension fund benefit is HUF 28,500 per month.

Private benefit plans:

Includes voluntary schemes provided by Voluntary Mutual Pension Funds (VMPS). Members of a voluntary pension fund can decide to take either of the following actions after a 10 year waiting period.

Continue make contributions

Withdraw partial or full savings from their account

Voluntary pension fund contributions can be made by the employee as well as the employer. 27% of the contributions paid by the employer are transferred to the state pension system and 10% contributions paid by the employee are transferred to the compulsory private pension fund.

In Voluntary Mutual Pension Funds (VMPF) employers contribute 2%-6% of salary to the funds and employees are required to make half of the employer’s contribution.

GEO Solutions or DIY Employment in Hungary?

Companies entering Hungary must make a decision whether to use their own resources for a Do-It-Yourself (DIY) approach, or to use a Global Employment Organization to handle payroll and employment responsibilities. A GEO or Hungarian Employer of Record solution makes it faster, easier and cheaper to deploy staff if they don’t have a Hungarian entity established that can run payroll.

A DIY approach will typically be delayed until there is a properly incorporated company ready to run payroll and may be a costly option. Shield GEO can deploy foreign staff in 4-6 weeks and local staff in 48 hours. Additionally Shield GEO is responsible for all compliance issues related to the employment.

Outsourcing Employment Through a GEO Employer of Record Service

Using Shield GEO Employer of Record Services in Hungary

Compliance with local employment requirements is just one of the issues foreign companies face when employing staff in Hungary. For companies which intend to employ their staff directly through their incorporated Hungarian entity, professional legal advice is recommended. Shield GEO provides an alternative path for companies to outsource the employment of their staff in Hungary.

As a Global Employer Organization (GEO), Shield GEO acts as the Employer of Record and ensures the employment is compliant with host country regulations regarding employment. In addition Shield GEO will handle payroll processing, tax and immigration. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into Hungary.

The Shield GEO solution is an attractive alternative where

– the company is looking to employ staff quickly

– the company doesn’t have an appropriately incorporated entity in Hungary

– the company wants to work within a defined budget

– the company wants to limit its initial commitment in Hungary

– the company needs help with tax, employment, immigration and payroll compliance in Hungary

Payroll

Shield GEO pays the employee on a monthly basis, typically on the last working day of the month although we can adapt to your preferred schedule. Income tax and social security (where applicable) are deducted at source and paid to the local tax authorities.

Foreign nationals are subject to Hungarian social security contributions only if:

They are employed locally by a Hungarian employer

They work in Hungary as employees of a non-Hungarian employer and are nationals of an EU member state

Employer must contribute 27% of gross monthly payroll in the form of social contribution tax. As of 1st of January 2014, Employers of non Hungarian citizens are exempt from paying social security contributions for such employees. While the minimum wage used for the calculations is 101,500 forints there is no maximum limit.

Minimum monthly wage is used to calculate social security contributions and also cover work injury benefits, sickness and maternity benefits and unemployment benefits.

Employees Social Security and statutory contributions

Employee contributions are 8.5% of covered monthly earnings. Since January 1 2014 resident non-citizens are exempt from paying contributions for up to 2 years. While the minimum wage used for the calculations is 101,500 forints there is no maximum limit.

Payroll and Tax in Hungary

There are specific rules in Hungary depending on whether your company employs residents or non-residents. The key concerns for a company that needs to comply with tax laws in Hungary are net taxable income, social security contribution, value added tax (VAT), corporate income tax, specific business tax (SBT), value added tax (VAT), and property tax. Moreover, international treaties to avoid double taxation, international social security agreements, free trade agreements and special tax regimes for specific industries or sectors can make an indirect impact on a company’s tax environment.

A remote payroll in Hungary is where a foreign company, i.e. a non-resident company, payrolls a resident employee in Hungary.

Thus a non-resident company is permitted to process payroll for Hungary residents who are on its payroll. Another option for a non-resident company to payroll its employees in Hungary would be to use a fully outsourced service like a GEO or PEO which will employ and payroll the staff on their behalf.

In some cases, a company will register their business in Hungary under one of the forms available but prefer to have another company administer its payroll. This can be accomplished through a payroll provider. It is important to note that the company, as the Employer of Record, is still fully responsible for compliance with employment, immigration, tax and payroll regulations. But the payroll calculations, payments and filings can all be outsourced to the payroll provider.

Larger companies with a commitment to Hungary may wish to run their own local payroll for all employees, foreign and local. In order to accomplish this, they will have to complete incorporation, register the business and then hire the necessary staff. There will be a need for in country human resources personnel who have the background needed to manage a Thai payroll, and can fulfil all tax, withholding, and payroll requirements.

This approach carries significant cost and requires some knowledge of local employment and payroll regulations. The company will need a local accounting firm and potentially legal counsel to ensure full compliance with Thai employment laws.

Companies can outsource the employment and payroll of their staff in Hungary to a GEO, like Shield GEO. This is possible for both foreign workers and Hungary nationals. This is the easiest, fastest and safest way to payroll staff in Hungary.

Shield GEO manages all aspects of payroll for workers in Hungary, including taxes, withholding, social security payments and other statutory requirements. Shield GEO becomes the Employer of Record and employs the staff on behalf of the client.

Staff are paid monthly with tax and social security deducted at source and paid to local authorities. Shield GEO will invoice the client monthly in advance of the payroll date. The invoice consists of the Total Cost of Employment (Base salary + Employers Statutory Contributions + Additional statutory contributions) and a Management Fee. Shield GEO provides the employees with payslips.

Foreign nationals are subject to Hungarian social security contributions only if:

They are employed locally by a Hungarian employer

They work in Hungary as employees of a non-Hungarian employer and are nationals of an EU member state

Employer must contribute 27% of gross monthly payroll in the form of social contribution tax. As of 1st of January 2014, Employers of non Hungarian citizens are exempt from paying social security contributions for such employees. While the minimum wage used for the calculations is 101,500 forints there is no maximum limit.

Minimum monthly wage is used to calculate social security contributions and also cover work injury benefits, sickness and maternity benefits and unemployment benefits.

Employee contributions are 8.5% of covered monthly earnings. Since January 1, 2014 resident non-citizens are exempt from paying contributions for upto 2 years. While the minimum wage used for the calculations is 101,500 forints there is no maximum limit.

A foreign taxable person is eligible to recover Hungarian input VAT if the following conditions are met.

The business does not have Hungarian residency

The business does not have any taxable supplies in Hungary

Tax exempt cross border transportation from/to third countries

Tax exempt cross border passenger transportation

Supplies for which the reverse charge mechanism applies

Electronically provided supplies where the foreign taxable person opted for application of the special regime for non-established taxable persons supplying electronic services to non-taxable persons

The standard VAT rate is 27%. While the reduced VAT rates are 18% and 5%. It’s not necessary to appoint a Hungarian fiscal representative to claim a VAT refund based on Directive 2008/09/EC or the 13th Directive.

There is no withholding tax levied on dividends paid to foreign companies. However, dividends paid to a non-resident individual can be subject to withholding tax at 18% unless if the tax rate is reduced under a tax treaty.

Hungary does not levy withholding tax on interest paid to foreign companies. However, interest paid to a non-resident individual can be subject to withholding tax at 18% unless if the tax rate is reduced under a tax treaty.

There is no withholding tax levied on royalties paid to foreign companies. However, dividends paid to a non-resident individual can be subject to withholding tax at 18% unless if the tax rate is reduced under a tax treaty.

A personal income tax allowance is granted through a family allowance ( (Családi Adókedvezmény). The total allowance is equal to the individual allowance multiplied by the number of beneficiary dependent children. For the first and second child an allowance of HUF62,500 is granted while an allowance of HUF206,250 is granted in the case of 3 or more children.

Immigration and Work Permits in Hungary

Since Hungary is a member of the European Union (EU) as well as a party to the Schengen Treaty, differing rules and conditions apply to EU/EEA nationals compared to non-EU/EEA nationals. Foreign nationals from non-EU/EEA member countries need to apply for a valid work permit and/or visa to work in Hungary. Minister of National Economy publishes on an annual basis the number of work permits that can be issued to foreign nationals which is published in the Official Hungarian Gazzette (Magyar Közlöny).

All foreign nationals who intend to work in Hungary must obtain a work permit.

Types of work permits:

Individual work permit

Joint work permit

Residence permit

Individual work permits are issued if a foreign national wishes to work in Hungary for a period not exceeding 90 days during a 180 day period. A Joint permit is required if a foreign national intends to work in Hungary for a period exceeding 90 days within a 180 day period.

Process to obtain a work permit:

Step 1: Advertise the job in the Hungarian Labour Office (Munkaügyi Központ) for a fixed period of 15 days to allow sufficient time for unemployed Hungarian national to compete for the job vacancy.

Step 2: Initiate a manpower procedure by submitting a valid manpower request to the regional branch of the labour centre

Number of work permits issued for foreign employees cannot exceed the average number of workers requested by employers (monthly basis) as reported during the previous year. Such data are made available on an annual basis in the Official Hungarian Gazzette (Magyar Közlöny) published by the Minister for National Economy.

An employer must satisfy the following conditions to be granted work permits:

A valid workforce requirement for the foreign national prior to applying for a work permit

Absence of Hungarian nationals to fill the workforce requirement

Foreign national satisfies the employment conditions

Step 3: There are two procedures applicable.

General procedure

Simplified procedure

Requests for a work permit must be made within 60 days from making a labour demand request. Some of the key documents required include:

Certificate of vocational qualification required to perform the job activities

Employment conditions certificate

Document certifying employer’s title of operation

Medical certificate

General procedure:

Submit a work permit application to the Labour Centre if the foreign national intends to work for a period less than 90 days with a 180 day period

If the foreign national intends to work for a period exceeding 90 days within an 180 day period, the joint permit should be submitted to the Immigration Bureau. It takes up to 90 days to obtain approval for a joint work permit and is valid for a 2 year period. Such work permits can be extended for an additional 2 year period.

Simplified procedure:

A simplified procedure does not require the employer to submit a manpower request when submitting the application for an individual work permit to the Labour Centre or when submitting the application for a joint permit to the Immigration Bureau.

Circumstances under which a simplified procedure may be approved:

If one or more of the foreign firms/persons possess majority ownership interest in the company applying for the work permit. However, the number of foreign nationals to be employed cannot exceed 5% of the total work force of the company as of 31st of December in the immediate preceding year.

If the employer intends to employ a foreign national for installation work, or provide guarantee, maintenance, or warranty related activities for more than 15 consecutive working days

If the foreign employee is exempt from work permit requirements a residency permit must be applied for

Step 4: Labour centre will make the final decision within 10 – 30 days from submitting the work permit. Once the work permit is approved a resolution will be issued by the Labour Centre specifying:

Single permit: A residence permit which authorizes a third country national to establish an employment relationship with a Hungarian employer.

Single application procedure: Authorizes the third country national to stay in Hungary for more than 90 days and less than 180 days based on employment relationship with a Hungarian employer on the basis of an application submitted by a third country national.

Documents required:

Photo and fingerprints (biometric information)

Documents supporting legal employment:

Temporary work booklet

Business plan for business activity

Individual business card/registration number

Agriculture permit (for primary producers)

Agency/business/user contract signed by a private individual

A deed for a business association, co-operative, or any other legal person created for the purpose of making profits has legally employed at least 3 Hungarian citizens or persons having rights for free movement and residence for atleast 6 months on a continuous basis

Foreign applicant’s stay in Hungary is indispensable for the business association and it’s based on the attached business plan

Documents supporting the financial conditions necessary to live in Hungary:

A bank certificate issued by a Hungarian or foreign bank

A certificate of income issued by the employer

A certificate issued by the employer and/or the tax authority with respect to regular income from abroad

Documents supporting the existence of Hungarian accommodation:

A rental agreement

A document approving the use of the flat by courtesy

A document evidencing the availability of a reserved and paid place of accommodation

Certificate proving the place in a dormitory

A document evidencing the ownership of a flat

A contract of sale and purchase of a real estate and state approval for acquiring the real estate

Documents supporting the existence of an all inclusive health insurance:

Must provide evidence of full health coverage

Documents supporting the existence of provisions to leave the country:

A return air ticket

A valid passport or necessary permit allowing the third country national to return to his/her country of origin

Visa extension:

Visa extension is allowed provided that at least 30 days prior to the expiration of the visa the applicant submits the required documentation to the respective regional directorate of the Office of Immigration and Nationality. Moreover, the passport must be valid for at least 3 months at the time of visa extension.

*Please check Single application procedure for the respective process to apply for the visa.

Validity: A residence permit for employment is issued for a 3 year period and can be extended up to 3 years occasionally. In case if the permit is issued for a maximum of 2 years, then it can be extended for a maximum of 2 years occasionally.

Visa fee: EUR 60

Time taken to process the visa: 21 days

Step 6: Foreign nationals working in Hungary should obtain:

A Social Insurance Identification Number (TAJ-szám) from the National Health Insurance Fund Administration

A tax identification number from the tax authority

Rules for European Area Citizens (EEA):

Permission is not required for EEA citizens to enter into an employment arrangement in Hungary. However, a notification is required.

Employer is obligated to inform the Labour Centre about the employment of an EEA national. The notification must contain the following information:

Number of people employed

Their age

Citizenship

Qualifications

HSCO number of the position

Form of the employment relationship

For relative status, statistical core number of the employer and information pertaining whether the employment relation just started or ceased

Next, the notification is verified by the Hungarian Employment Centre.

Employers should retain the verification of the employment start and end date post 3 years from termination of employment.

Once you get in touch with us, one of our consultants will take all the work off your hands, coordinate with our local partners to get all the required permits organised, provide the processing time, costs, document-checklist and keep you informed through the process. Contact us to know more.

Types of visas in Hungary

Category

Description of Visa

Residence permit for paid activity

Documents required:

1. A work permit
2. An employment contract
3. A document certifying occupancy in Hungary
4. A certificate indicating how the applicant will make a living until he or she receives the work permit (bank account statement, employer’s certificate etc.)

Or

5. Articles of Association
6. Resolution on the court registration of the enterprise
7. A document certifying the occupancy in Hungary
8. A certificate on the acquisition of the qualifications necessary to fill the vacancy
9. Declaration of expected yearly income (certificate)
10. A certificate of the amount of money at the person’s disposal in Hungary
11. Simplified balance sheet of the prior year
12. A certificate declaring that the firm does not have public debt
13. If the firm has Hungarian employees: their employment contract
14. In case of a new enterprise: a brief business plan

Fee for residence permit: EUR 60

Time taken to process the application: 30 days

Seasonal employment visa

Seasonal work can be undertaken for agriculture, horticulture, animal husbandry, and fishing in possession of a work permit and a seasonal work visa. This visa entitles the holder to a single or multiple entry. It facilitates the applicant to be employed for longer than 3 months and less than 6 months. The validity of the visa is limited to 1 year. The permit has to define the exact time and work place. In case of multiple employments, the seasonal employment permit must define the detailed information of every employment.

A seasonal work visa maybe issued to a third country citizen who:

• Has a valid travel document
• Has a permit enabling return or outward travel
• Certifies the purpose of entry and stay
• Has financial means to cover the cost of the stay
• Has health insurance for the period of stay

*Documents supporting the financial conditions necessary for living in Hungary

• A bank certificate guaranteeing financial means
• Income tax certificate issued by the tax authority with respect to the previous year
• A certificate of income issued by the employer
• A certificate issued by the employer and/or tax authority with respect to regular income from abroad
• A declaration made before a notary public by a family member having a residence permit, a permanent residence card or the legal status of an immigrant or settled person giving assurance to maintain and support the applicant

*Documents evidencing the existence of Hungarian accommodation

• A rental agreement certifying a rental relationship
• A document on the use of the flat by courtesy
• A document evidencing the availability of a reserved and paid accommodation
• A valid letter of invitation supplied with the authority’s consent
• A contract of sale and purchase of real estate and a copy of the decision of the competent county government office granting permission for the acquisition of the real estate.

*Documents supporting an all-inclusive health insurance

*Documents evidencing the conditions of exit

• A valid passport and/or the permits required for entry into the country indicated
• A valid return air ticket

Visa fee: EUR 40
Time taken to process the application: 15 days

Residence permit for the purpose of employment or other gainful activities

Entitled persons:

• Perform work for a compensation based on a legally defined employment relationship
• Perform work individually for a compensation
• Perform business activities as the owner, leading office holder or member of a managing, representative or supervisory body of a business association, co-operative created for the profit purposes

Foreigners need to have a work permit to work in Hungary.

Single permit: A residence permit which authorizes a third country national to establish an employment relationship with a Hungarian employer.
Single application procedure: Authorizes the third country national to stay in Hungary for more than 90 days and less than 180 days based on employment relationship with a Hungarian employer on the basis of an application submitted by a third country national.

Documents required:
• Photo and fingerprints (biometric information)

Documents supporting legal employment:
• Temporary work booklet
• Business plan for business activity
• Individual business card/registration number
• Agriculture permit (for primary producers)
• Agency/business/user contract signed by a private individual
• A deed for a business association, co-operative, or any other legal person created for the purpose of making profits has legally employed atleast 3 Hungarian citizens or persons having rights for free movement and residence for atleast 6 months on a continuous basis
• Foreign applicant’s stay in Hungary is indispensable for the business association and it’s based on the attached business plan

Documents supporting the financial conditions necessary to live in Hungary:
• A bank certificate issued by a Hungarian or foreign bank
• A certificate of income issued by the employer
• A certificate issued by the employer and/or the tax authority with respect to regular income from abroad
Documents supporting the existence of Hungarian accommodation:

• A rental agreement
• A document approving the use of the flat by courtesy
• A document evidencing the availability of a reserved and paid place of accommodation
• Certificate proving the place in a dormitory
• A document evidencing the ownership of a flat
• A contract of sale and purchase of a real estate and state approval for acquiring the real estate

Documents supporting the existence of an all inclusive health insurance:
• Must provide evidence of full health coverage
Documents supporting the existence of provisions to leave the country:
• A return air ticket
• A valid passport or necessary permit allowing the third country national to return to his/her country of origin

Visa extension:

Visa extension is allowed provided that at least 30 days prior to the expiration of the visa the applicant submits the required documentation to the respective regional directorate of the Office of Immigration and Nationality. Moreover, the passport must be valid for at least 3 months at the time of visa extension.
*Please check Single application procedure for the respective process to apply for the visa.
Validity: A residence permit for employment is issued for a 3 year period and can be extended up to 3 years occasionally. In case if the permit is issued for a maximum of 2 years, then it can be extended for a maximum of 2 years occasionally.

Visa fee: EUR 60
Time taken to process the visa: 21 days

Single application procedure

Enables a third country national to stay in Hungary for a period exceeding 90 days and enables the applicant to establish a legal employment relationship with a specific employer.

Eligibility for single application procedure:
• Third country nationals submitting an application for residence permit for gainful activities with the aim of a legal employment relationship
• Third country nationals who intend to establish a legal employment relationship and submits a residence permit application for family reunification or submits an application for EU Blue card
• Third country nationals who intend to establish a legal employment relationship and possesses a residence permit application for family reunification or posseses an application for EU Blue card
• Special cases
From an employment/business perspective, the single application procedure is NOT applicable to the following personnel.
• Those who stay in Hungary with a seasonal work visa
• Third country nationals who are transferred as intra-corporate employees and who already stay or intend to stay in the territory of Hungary
• Personnel whose purpose of residency is to perform independent gainful activities (private entrepreneurs, small scale agriculture producers etc.)
• Third country nationals who are eligible to carry out gainful activities during their stay in a period between 90 days and 180 days.

*Applicant is required to submit the application in person. Moreover, a valid travel document/passport along with the submission of biometric information such as fingerprints and a photo is required.

Documents verifying the establishment of an employment relationship:
• Valid employment contract
• Certified copies of educational qualifications
• In the case of EU Blue card, certified copies of the proof of higher professional qualification

Employment agreement should include:
• Scope of duties
• Specification of professional qualifications required to perform duties
• Amount of remuneration payable to third country nationals
• Determination of the employment relationship
• Expected duration of the employment relationship

*If the residence permit is issued as a single permit such permits are valid upto two years and can be extended for a maximum of two years, occasionally.

EU Blue card

EU Blue card is issued to a third country national who has been issued a residence permit for work that requires advanced skills (high skilled workers) by an European Union (EU) member country. The applicant must be able to prove at least 18 months of lawful stay in an EU member state and meets the following conditions.

A third country national is not a Hungarian citizen nor stateless persons except for persons with the right for free movement and residence (EEA nationals and accompanying family members of EEA citizens and Hungarian citizens).

Application procedure:
• Submit a valid passport
• Submit biometric data (fingerprints, photograph)
• The application for the EU Blue card must be submitted to the Consular Officer or at other authorized locations
• A statement certifying that the applicant will leave the EU territory voluntarily if the application is rejected
• Follow the single application procedure to obtain the EU Blue card
• Once the EU Blue card has been approved, the regional Directorate grants permission to issue the residence permit visa at the consular representation of Hungary and notifies the Consular Officers.
Extension of EU Blue card: Application for an extension can be submitted 30 days in advance to the expiration of the right of residence. At the submission the applicant must have a valid passport with atleast 3 months of validity.

Documents required:

Documents certifying the purpose of residence:
• A valid employment contract requiring a higher education qualification between the third country national and the employee upto a 4 year tenure
• Documents providing proof of the higher education qualification

Documents supporting the existence of an all exclusive health insurance
• A full health coverage insurance

Term: EU Blue card is usually issued for a 1 year period. However, if the employment tenure is for less than 1 year, the EU Blue card will be issued for a period up to 3 months post the expiration of the employment contract. The maximum tenure for an EU Blue card is 4 years and can be extended for another 4 year period.

Visa fee: EUR 60
Time taken to process the visa: 90 days

Schengen Business visa

This visa is issued to non-European citizens who wish to travel to a Schengen area on a short term basis for a business specification purpose on a single or multiple entry. Schengen Business visa holders can stay in a Schengen country for a 90 day period during a period of 6 months.

Documents required:
• Passport sized photo (less than 6 months old, 35 X 40 mm, taken in a light clear background)
• Return air ticket
• Travel medical insurance policy
• Passport valid for atleast 3 months from the date of departure
• Cover letter explaining the purpose of visit
• Profile of the applicant’s company/organization
• Memorandum and Article of Association in original certified copy (registered with joint stock companies)/ Trade License (first issued and present renewal)/ Proprietorship/Partnership documents
• Current bank statements
• Employer letter specifying the purpose of the business travel and the business itinery
• invitation letter from the partner company in the Schengen zone, faxed also to the corresponding consulate
• Coverage of applicant’s expenses during the stay
• Hotel reservation document
• Proof of prior trade relations between the two companies (if relevant)
Applicant needs to attend the Schengen visa interview in person.

Visa fee: EUR 60
Time taken to process the visa: Atleast 15 days

Working (Employment) Schengen visa

Non-European citizens who intend to travel to a Schengen area for a short term for an employment specification should obtain an Employment Schengen visa.

Documents required:
• Passport sized photograph (less than 6 months old, 35 X 40 mm, taken in a light clear background)
• A passport valid for atleast 3 months after the departure date along with all the copies of your previous visas
• Return air ticket
• Travel medical insurance policy
• Two application forms should be filled
• Employment contract between the applicant and the potential employer in the Schengen area
Applicant needs to attend the Schengen visa interview in person.

Term of the visa: Schengen Employment visas are issued for a long term based on the term of employment

Visa fee: Long stay visa (more than 90 days) EUR 99, short term stay visa (less than 90 days) EUR 60
Time taken to process the visa: 3 months

Setting up a company in Hungary

When setting up a company you may want to consider these factors:

Business factors

Hungarian law allows Hungarians and foreign natural persons as well as Hungarian and foreign legal entities without a legal personality to establish a business organization under the Hungarian law. The state may participate in a business organization without any restrictions.

You may also want to consider the following when making your decision:

The industry and the nature of business that will be established

Nationality of the headquarters/Management and employees

Minimum capital and conditions

Regulatory framework

There are numerous rules and regulations that govern Hungarian business organizations.

Act XLIX of 1991 on Bankruptcy Proceedings and Liquidation Proceedings

There are seven types of business forms available for foreign companies in Hungary. Each of these business forms has unique advantages and disadvantages, as well as differing scope of approved business activities, registration requirements and minimum capital requirements. Both foreigners as well as Hungarian nationals can establish a business in Hungary. Moreover, there are no restrictions on a business organization registered in Hungary to be exclusively owned by foreign nationals. The only restriction that applies to foreign business owners is that if they do not have a residence in Hungary, an agent of service for process must be appointed in the due process.

When setting up a company in Hungary you have the following options.

General (unlimited) Partnership (Kkt)

Limited Partnership (Bt)

Limited Company (Kft)

Private Company limited by shares (Zrt)

Public Company limited by shares (Nyrt)

Branch Office

Commercial representative office

This article provides a general guideline for foreign businesses that seek to enter Hungary for business purposes. In particular, it looks at common pathways to establish a business presence in Hungary, generally through a Partnership, Limited Company, Commercial, or Representative Office. In addition, various economic, tax, and regulatory factors are provided throughout as a source of useful information to assist those who seek to establish a business presence in Hungary. The guide also looks at some immigration requirements such as obtaining appropriate visa status.

Limited Liability Company (Kft)

LLCs can be established with only one member and have pre-determined initial capital.

Members are not liable for the company’s liabilities. Members of a LLC cannot be recruited through public offerings. The members’ rights to the company’s assets are represented via quotas in the company.

All companies must have a supervisory board if

If the law requests so

If the annual average number of full time employees exceeds 200

Investment capital requirements: HUF 500,000. Capital can be contributed in cash or in kind.

Company Limited by shares (Rt)

A Company Limited by shares can be established as a sole member entity or as a large entity with several investors.

Private Company Limited by shares (Zrt)

A Company Limited by Shares (CLS) can be established via a private offering whereby the shares will be offered only to its founders. A private CLS can issue printed share certificates. Such shares can take the form of ordinary shares, employee shares, interest-bearing shares, redeemable shares, and preference shares which have the following sub categories.

Dividend preference shares

Preference with regards to liquidation ratio

Preference with regards to voting rights

Preference with regards to the appointment of executive officers or members of the supervisory board

Shares providing pre emption rights

A supervisory board is required only if shareholders representing atleast 5% of the voting rights request for an advisory board or if the following mandatory cases persist.

All companies must have a supervisory board if

If the law requests so

If the annual average number of full time employees exceeds 200

Public Limited Company (Nyrt)

A public CLS maybe established via a public offering where shares are offered to the public. Public CLS’ have dematerialized shares which are registered in the shareholders security account maintained in a financial institution. Such shares can take the form of ordinary shares, employee shares, interest-bearing shares, redeemable shares, and preference shares which have the following sub categories.

Dividend preference shares

Preference with regards to liquidation ratio

Preference with regards to voting rights

Nyrt must have a supervisory board except in the case of a unified company management system. Shares of a Public Limited Company can be traded in the stock exchange.

Common attributes of Rts:

Auditor: Not required other than in the following cases.

Accounting Act requires so

Articles of Association prescribes the need for an auditor

Required by the law

Investment capital requirements:

Private: HUF 5 million. Capital can be contributed in cash or in kind.

Public: HUF 20 million. The company cannot be established without capital contributions.

Management: Board of Directors (3 to 11 personnel) or a CEO. If the constitutive documents prescribe, the general director can manage the company.

Registration fee:

Private: HUF 100, 000

Public: HUF 600, 000

Unlimited Partnership (Kkt)

The liabilities of the members are joint and unlimited for the obligations of the Partnership.

Partners are not required to personally take part in the business activities of the Partnership. Every member is entitled to represent the Partnership unless the Articles of Association specifies otherwise. Partnership is required to have at least 2 members.

Investment capital requirements: No minimum capital required

Management: Partners

Registration fee: HUF 50,000

Limited Partnership (Bt)

A Limited Partnership must have atleast one general partner and atleast one general partner.

The general partner has unlimited liability (multiple general partners are jointly and severally liable). The Limited Partner has limited liability based on the capital contribution. Only the general partner is authorized to represent the Limited Partnership unless if the articles association specifies otherwise.

Investment capital requirements: No minimum capital required

Management: General partner

Registration fee: HUF 50,000

Commercial Representative office

Foreign investors can perform business functions such as contract negotiation, advertising and exhibiting products and other forms marketing on behalf of the parent company

However, the representative office is prohibited to pursue core business activities. A representative office does not have a legal personality. A commercial representative office is an unincorporated organizational unit of a foreign company established upon its entry into the Company Register. Representative offices are obliged to keep their monetary assets in a bank account.

Investment capital requirements: Not applicable

Management: Not applicable

Registration fee: HUF 50,000

Branch Office

A branch office is an organizational unit of a foreign company which is authorized to carry out independently business activities. However, it does not have a legal personality.

A branch office may carry out business activities, acquire property, exercise certain rights and assume liabilities in its own name. A branch office may not act as a representative or agent of a foreign company or a branch of a foreign company. The only exception is a branch set up by a foreign company in any EEA member state. Branch offices must be registered by the Court Registry and are obliged to keep their monetary assets in a bank account.

Investment capital requirements: Not applicable

Management: Not applicable

Registration fee: HUF 50,000

Outsourcing Employment Through a GEO Employer of Record Service

Whether to incorporate in Cambodia, and what sort of entity to setup are just two of the many choices companies must make when expanding into a new market.

If the company intends to have staff in Hungary they must also decide whether they will administer that employment internally or use a Global Employment Organization to handle payroll and Employer of Record responsibilities. A GEO Employer of Record solution is an attractive alternative where

the company is looking to setup an office quickly

the company wants to work within a defined budget

the company wants to limit its initial commitment in Hungary

the company needs help with tax, employment, immigration and payroll compliance in Hungary

The complexity of employment regulations in Hungary makes the use of a GEO advisable coupled with local legal counsel to ensure full compliance with employment laws, for example the drafting of local contracts for workers.

Shield GEO provides a comprehensive service in Hungary allowing companies to deploy their staff quickly with reasonable, clearly stated costs and timeframes. The company contracts directly with Shield to employ and payroll their staff on their behalf in Hungary.

Shield GEO then becomes the Employer of Record. Shield GEO assumes the legal responsibility for these employees, sponsoring them on work permits, complying with local employment law and running their monthly payroll. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into Hungary. Read more about outsourced employment through Shield GEO.